OpenAI $18 billion Chip Bottleneck: Broadcom's Funding Contingent on Microsoft Underwriting 40%, Mass Production Delayed to 2027

According to Dynamic Beating’s monitoring, last fall OpenAI and Broadcom made a high-profile announcement about developing their own AI chip, aiming to reduce reliance on NVIDIA. However, this deal has now stalled over the issue of “who will pay.” Based on an internal memo obtained by The Information, the two parties are locked in a tug-of-war over the initial $18 billion production funding for Phase One. Broadcom’s core funding condition is that Microsoft must step in and commit to purchasing around 40% of the chips.

This ambitious chip manufacturing plan, codenamed Nexus, ultimately aims to deploy chips supporting 10 GW of power consumption (with a production cost alone exceeding $180 billion). To mitigate risk, Broadcom hopes that financially robust Microsoft will buy the first batch of 40% of the chips, install them in their data centers, and then sublease them back to OpenAI as a guarantee for fund recovery. If Microsoft does not make the purchase, OpenAI will have to find another buyer. However, Microsoft has only reserved data center space at the moment and has not made a procurement commitment. An OpenAI memo bluntly states that this has become a “continuing systemic risk” for the project.

While OpenAI aimed for independence through chip manufacturing, it is now further entangled. The executive in charge of the project, Sachin Katti, warned internally that making Microsoft’s procurement commitment a financing prerequisite would “severely limit long-term development,” rendering the deal financially unattractive. However, the company has decided to proceed due to the strategic value. Additionally, constrained by Broadcom’s tight capacity allocation at TSMC, the first inference chip, codenamed Jalapeno, will not see large-scale production until 2027. As a compromise, Broadcom recently dropped its baseline requirement that OpenAI must make “one-to-one matching contributions” and agreed to take on more upfront funding.